Troika to look at Cyprus gas sovereign wealth fund

Who on earth is in charge of gas policy anyway?
A second reason why we need to be careful of the resource curse is that the prospect of gas revenue has already led to damaging rivalries among the ministries, semi-government organisations and various other bodies with some responsibility for gas.
As one small example, just before the long weekend, the Ministry of Finance was still waiting for critical documents from the Ministry of Commerce in order to prepare for the troika’s questions on the sovereign wealth fund.
But these are not the only two institutions where gas rivalry is causing confusion.
Each of these institutions has its own party political affiliation, its own preferences for gas import or export options and therefore its own behaviour towards potential investors.
During a discussion on Twitter about who was in charge of gas policy the other day, a politically well connected person replied that it was the foreign minister.
Yes, that’s right, the foreign ministry is apparently in charge of gas, because it is a geostrategic issue. The commerce minister does sit on the committee, but the foreign minister is in charge.
Where that leaves the ever-changing national hydrocarbons company (KRETYK), the advisory board selected under the previous government which we have never heard from again, the natural gas company (DEFA) or the Electricity Authority of Cyprus (EAC), not to mention individual politicians who take a keen interest in gas, is anyone’s guess.
But the result is total confusion for foreign investors. Worse still, if you happen to be a company involved in a project whose goalposts keep moving, it results in a lot of anger and resentment against Cyprus that gets spread around the foreign communities in Cyprus and reported back home.
And if you think I have a particular company in mind, I actually have two!

And when is the money coming?
The other irony of the rivalry over gas is that we do not even know when the first gas money will come.
The government’s official aim is to have the first gas exports by 2020.
Regular readers will know that I have always been sceptical about this deadline, partly because of volumes but also because I am sceptical about politicians keeping out of the way of business.
But the government’s deadline is in more doubt than ever now that the average estimated gas resource in Block 12’s Aphrodite field was revised down to 5 trillion cubic feet instead of 7 tcf.
Talk to any industry specialist, and they will tell you that 5 tcf is not enough to build a liquefied natural gas (LNG) plant. It does not guarantee security of supply so it will not get you financing.
That means we’ll have to wait until Noble finds more in Block 12, or until Israel decides it can trust Cypriots to look after its precious newfound resource in a jointly run LNG plant, or until Total and Eni-Kogas find gas in the other blocks.
The complexities of Israeli gas politics and the tight availability of rigs means that any of these options will likely take years rather than months to become certain.
This will push our first gas exports into a future when prices could be negatively affected by more supply from US shale or potentially Chinese shale gas, or Australian or East African LNG.
This is why you have not heard anyone official talk about proven reserves. In the gas market, as I learned from an industry specialist at the Levantine Training Centre course last week, gas resources do not become gas reserves until “commerciality” has been declared.
And declaring something to be commercially viable depends as much on the timing of the cash-flows, not just the size. In my October Sapienta report, I shall be revisiting my earlier estimates for the NPV of Aphrodite’s gas based on various scenarios for gas exports.